Bahia: Record supply of new homes might trigger price corrections

The real estate marketin Bahiaaccumulatesthe largest inventory ofunitsin its history.There is a whopping 18,000 new homes ready orunder construction up for grabs. The excess of supply has never been greater.The Directors’ Associationof theReal Estate Marketin Bahia(Ademi-BA) has recommendedcautionto its developers when launchingnew buildings. In privatemeetings among the sector’s members, the message is to “slowdown to avoid a sharp correction in property prices”. To avoid an excessive increase in inventory, the developers are being advised to improve their project planning processes with the use ofaccurate supply/demand studies before launching properties.

In amarket thathas always showna discipline in the balancing ofsupply anddemand,such a high inventory of properties caught experts bysurprise. The euphoria ofbuyers withgreater access tocredit is nowcooling down as property prices shot updue to inflation costs and low productivity.

But the problemis not specific toBahia.Other states, like Sao Paulo, also suffer from a slowdown in property salesand a growinginventoryof new homes. The question nowis whether thecommon lawwill prevailinthe market, causing the fallofproperty pricesin the face ofagreater supplythandemand.